Maybe there never was a danger of financial meltdown.

Maybe there never was a danger of financial meltdown.

Maybe only a few institutions like AIG, which is reportedly linked to the CIA, were in trouble.

Maybe certain people are manipulating events.

Credit Crisis Overblown?

The current issue of Treasury & Risk Magazine tells us:

1. On 18 September 2008, Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Hank Paulson spoke to members of Congress about a financial meltdown.

10 days later, the House rejected a Wall Street bailout package.

A week later they gave Paulson less power and only half the money he wanted.

2. Meanwhile, the financial system did not collapse.

A few banks were failing; there were no runs on them.

3. It may be that there wasn’t any danger of a meltdown in the first place.

In October 2008, three senior economists working at the Federal Reserve Bank of Minneapolis examined the Fed’s own data.

They concluded in an article entitled Facts and Myths About the Financial Crisis of 2008 that the claims that interbank lending and commercial lending had seized up were simply not true.

4. V.V. Charri, an economist at the Minneapolis Fed. explained:

"Bank lending to consumers and to non-financial companies had not ceased, and banks were lending to each other at record levels.

"Maybe Bernanke and Paulson had information that they were not making public, but the available data simply did not support what they were saying."

5. Charri and his colleagues and co-authors Lawrence Christiano and Patrick Kehoe agree that with companies like Lehman Brothers, AIG and Citigroup foundering because of toxic debt instruments, there was a sense of a financial crisis brewing, but they say it wasn’t a credit freeze.

Charri says: "This was a lot like the run-up to the Iraq invasion in 2003.

"You had people in government saying: `We’re smart guys, trust us.’ But they were either wrong or they were lying."

Adds Kehoe: "Normally, when you’re going to spend a lot of money, you present the data and the economic theory to support it, yet here’s the biggest non-military government intervention in history since the Great Depression, and there was no evidence presented to support it, and no detailed economic argument made about what market failures this $700 billion was going to fix."

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